mattel elliot toy company

(1916-)
Mattel, Inc.

Overview

Ruth Handler was the mastermind behind the creation, marketing, and sales of the Barbie doll, first sold in 1959. Thirty years later, more than 800 million dolls in the Barbie family had been sold by Mattel, the company founded by Ruth Handler and her husband Elliot. In 1996 Barbie dolls and Barbie paraphernalia generated $1.7 billion dollars in revenue for Mattel.

Personal Life

Ruth Mosko was born on November 4, 1916, in Denver, Colorado. She was the youngest of ten children of Polish immigrants and was a tomboy who shunned dolls. Ruth’s Jewish father, Jacob Moskowicz, arrived in America via Ellis Island in 1907 where his name was shortened to Mosko. Because he was a blacksmith, he was shipped to Denver, center of the railroad industry, where blacksmiths were used for making and repairing tracks. Ruth’s mother, Ida Mosko, was 40 and in ill health when Ruth was born. From the age of six months, Ruth was raised by her eldest sister Sarah and her husband Louis Greenwald.

When she was 16, Ruth met Elliot Handler at a B’nai B’rith dance. Elliot, who wanted to be an artist, was deemed a poor match by Ruth’s family. They envisioned him as a starving artist, and were relieved a few years later when Ruth decided to move to Los Angeles, where she had landed a job as a secretary for Paramount Pictures while visiting a friend. Elliot followed Ruth to California, enrolled in art school, and found a job designing light fixtures. In 1938 they were married. Shortly before their daughter Barbara was born in 1941, Ruth quit her Paramount job. Their son Ken was born in 1944.

When Ken was six months old, Ruth decided she needed something to do besides take care of children. Within 25 years, the company she started, Mattel Creations, was a multimillion-dollar business. She was the first woman elected to the Toy Manufacturers Association board of directors and the first woman appointed to the Federal Reserve Board. President Richard Nixon appointed her to the National Business Council for Consumer Affairs and the Product Safety Committee.

While at the height of her success, in 1970 Ruth lost her left breast to cancer, then struggled with depression, a loss of self-confidence, and an inability to find a prosthetic breast that made her look “even.” At the same time, Mattel was under investigation for illegal accounting practices. Just when it seemed that poker games in local cardrooms would be her sole preoccupation, Ruth Handler decided to manufacture and sell prosthetic breasts. In 1975, both Ruth and Elliot left Mattel. Elliot went back to art school. They spent their retirement alternating their time between their Century City penthouse condo and their Malibu beach house. Elliot painted; Ruth doted over her grandchildren and played bridge.

Career Details

Elliot Handler was fascinated with new materials, especially an acrylic plastic called Lucite or Plexiglas that had been used only in the defense industry. When he and Ruth rented their first unfurnished apartment, all they could afford to buy was a bed, a table, and two chairs, so Elliot set to work designing some furniture and accessories that could be made from plastic. Ruth thought the sketches he produced were so good she encouraged Elliot to consider making up some samples for her to use in sales calls. The apartment came with half a garage (to be shared with a neighboring apartment), and the couple decided to locate the equipment needed to produce the samples in the garage. They made coffee tables, end tables, and lamps for their apartment, then used the leftover material to make hand mirrors, candle holders, cigarette boxes, and bookends. When those who shared the garage complained to the landlord, the Handlers were promptly evicted.

Elliot quit his job and dropped out of school, they moved into another apartment, and they rented a small space that had been a Chinese laundry to house their workshop. Ruth, still working at Paramount, made sales calls with the samples during her lunch hour. “I found that I loved the challenge of selling,” Ruth recalls in her autobiography. “Adrenaline surged through me whenever I walked into a store with samples and walked out with an order.” The plastic business in the Chinese laundry attracted four partners and quickly rose to become a $2 million enterprise making giftware and costume jewelry. But by 1945 Elliot grew restless.

A year earlier, Ruth had entered a business partnership with Harold “Matt” Matson, a friend from Elliot’s first job in Los Angeles. They persuaded Elliot to be their designer, even though he had a full-time commitment to his costume jewelry company. The three named their company Mattel (“Matt” for Matson and “el” for Elliot). Fortunately for Mattel, Elliot’s desire to experiment with new products and continuously expand his business led to a dispute with his partners, so he sold his interest in the company and joined Mattel full time. Matson withdrew due to illness, while the Handlers continued to work together, building what was to become the number one toy manufacturer in the world.

In its first full year of operation, 1945, Mattel showed sales of $100,000, mostly in dollhouse furniture. Their second year in business was not as good, since a competitor was able to undercut their price with doll-house furniture made from molded plastic. Undaunted, the Handlers turned to other types of toys, including a miniature plastic ukulele and a toy piano. The ukulele rapidly lost market share due to a cheaper imitation from a competitor, and Mattel took a $60,000 loss on the piano because of excessive breakage during shipping.

Their early problems taught the Handlers some poignant lessons in cutthroat price competition and product quality testing. They realized that a successful business had to produce unique and original products of superior quality and strength that could not be easily copied by competitors. “We never had any trouble selling our toys,” Ruth remembers in her autobiography. “The most difficult problem through the years was financing.” A shortage of capital and the refusal of banks to gamble on the struggling young firm put a music box project on hold, but a $20,000 loan from Ruth’s brother-in-law allowed Mattel to produce another winner.

In 1955 yearly sales reached $5 million and the Handlers decided to take a risk that would forever change the toy business: sponsorship of a 15-minute segment of Walt Disney’s Mickey Mouse Club on the ABC television network. The 52-week $500,000 contract was equal to Mattel’s net worth at the time. The payoff was immediate. The company’s television commercials brought in mail sacks full of orders and made their brand name well known among their viewing audience. In another television link, Mattel introduced toy replicas of classic guns and holsters, exploiting the popularity of television Westerns.

In 1959 Mattel made toy industry history with the introduction of the Barbie doll, the best-selling toy of all time. Named after the Handlers’ daughter, Barbie was 12 inches tall, with breasts and a curvaceous figure. Clothes and accessories had to be purchased separately. In subsequent years, additional dolls were added, including a boyfriend, the Ken doll, named after the Handlers’ son. The next season, Mattel entered the competitive large doll market with another winner, the first talking doll. That year, Mattel made its first public stock offering. Sales continued to soar, from $26 million in 1963 to more than $100 million in 1965. In 1968 another spectacular hit was introduced: Hot Wheels miniature model cars.

Even though half of the product line was rendered obsolete in any given year, the company’s profits continued to multiply. To deal with the need to keep new products in the marketplace, Mattel had as many as 300 people in its Research and Design department. The Handlers feared that they were not going to be able to continue at their exponential growth rate without exposing themselves to more risk. To solve this problem, Mattel turned into a worldwide enterprise through a host of acquisitions that included Dee and Cee Toy Co., Standard Plastics, Hong Kong Industrial Co., Precision Moulds, Rosebud Dolls, A & A Die Casting Company, Monogram Models, Ratti Vallensasca and Mebetoys, H & H Plastics Co., Metaframe Corp., Ringling Bros. and Barnum and Bailey, and others. In 1968 Mattel reincorporated in Delaware and began work on a $50 million Circus World theme park in Florida. In a joint venture with Bob Radnitz, Mattel produced its first movie, Sounder.

Chronology: Ruth Handler

1916: Born.

1932: Married Elliot Handler.

1944: Founded Mattel Creations with Harold Matson.

1955: Signed a $500,000 contract for sponsorship of Mickey Mouse Club.

1959: Introduced the Barbie doll.

1970: Diagnosed with breast cancer and a mastectomy was performed.

1973: Witnessed Mattel’s first loss.

1975: Resigned as president of Mattel.

1978: Pled no contest to charges of false reporting to the SEC, fraud, and conspiracy.

But the good times soon soured. Ruth described the major mistake made by Mattel in her autobiography: “We should have stayed in the toy business, accepted a slower growth rate, and resisted the temptation to acquire so freely. Our organization was not really equipped to evaluate and control so many diverse companies, and our internal auditing capability was inadequate to ferret out the problems in advance.” In 1970 Mattel’s plant in Mexico was destroyed by fire, which necessitated the cancellation of one-third of that year’s Christmas orders, and the following year a shipyard strike in the Far East cut off their toy supplies during their busiest season. To maintain the appearance of corporate growth, the financial records showed as income millions of dollars of orders that had been placed but not fulfilled. For two years (1971 and 1972) Mattel issued false and misleading financial reports. In 1973 the company reported a $32 million loss just three weeks after stockholders had been assured that the company was in sound financial condition. Mattel’s stock plummeted and the Security and Exchange Commission (SEC) stepped in to investigate.

Ruth, in charge of the company’s administrative and financial affairs, was indicted by a grand jury in 1978. She entered a no contest plea to the charges (false reporting to the SEC, fraud, and conspiracy) and was ordered to pay $57,000 in fines. Her 41-year sentence was suspended for a probation of five years, during which she was required to perform 500 hours per year of community service. Elliot, a product designer with no say in the day to day running of the company, was exonerated. The federal court ordered Mattel to restructure, while the firm’s bankers and creditors pressured the Handlers to resign. Shareholders then entered a series of class-action lawsuits. To settle, the Handlers turned over 2.5 million shares of their own stock, described by Ruth as “half of everything we’d worked for in the previous thirty years.” In 1980 the Handlers cashed in most of their remaining Mattel stock (worth $18.5 million), ending their involvement in the company they had founded. The company was able to reestablish itself and within a few years was again the world’s largest toy enterprise. Sales in 1997 were $4.8 billion, assets were $3.8 billion, and profits were $285 million.

Social and Economic Impact

When World War II ended, the toy market was bare and the baby boom, which would produce more than 77 million Mattel customers during the next 20 years, made the toy industry ripe for development. Before 1955 toy manufacturers relied primarily on retailers to show and sell their products, and advertising occurred only during the holiday season. Mattel was the first toy company to spend money on advertising year-round. The featured products all exceeded sales projections and the nature of selling toys changed radically. When Mattel’s product line and brand name became known to its young viewers and their parents, an ongoing demand for the toys forced retailers and wholesalers to carry them year-round. To handle the rapidly increasing demand for their products, Mattel hired its own “retail detail” people to visit stores, set up product displays, and monitor the rate of sales of the various products. Utilizing this feedback from the marketplace, Ruth Handler was able to constantly adjust production numbers based on retail sales, making her one of the first experts at sales forecasting and inventory control.

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